One need look no further than the national motto—liberté, égalité, fraternité—to understand that equality is an especially important concept in France. French policies play an important role in combating inequality. This is primarily achieved through a combination of minimum wage policies and an extensive tax and transfer system.

But these traditional equality-enhancing policies may have reached their limits as unemployment has become entrenched and budgets have been severely stretched. So, what are the best policies for a country weighing how to boost growth, lessen inequality, and minimize costs? It is not a zero sum game.

Small states are far more vulnerable than other countries to natural disasters and climate change. On average, the annual cost of disasters for small states (economies with a population of less than 1.5 million) is more than four times that for larger countries, in relation to GDP. These countries—whether landlocked nations or small island states—need a range of approaches to deal with catastrophe, including not only better disaster response but also more focus on risk reduction and preparedness. Continue reading “Small States Confront Big Challenges with Natural Disasters and Climate Change” »

China urgently needs to tackle its corporate-debt problem before it becomes a major drag on growth in the world’s No. 2 economy. Corporate debt has reached very high levels and continues to grow. In our recent paper, we recommend that the government act promptly to adopt a comprehensive program that would sacrifice some economic growth in the short term while rapidly returning the economy to a sustainable growth path.

“The Great Distortion.” That’s what The Economist, in its cover story of May 2015¸ called the systematic tax advantage of debt over equity that is found in almost every tax system.

This “debt bias” is now widely recognized as a real risk to economic stability. A new IMF study argues that it needs to feature more prominently on tax reform agendas; it also sets out options for how to do that.

In the midst of the Great Depression, the American economist Irving Fisher warned of the dangers of excessive debt and the deflationary pressures that follow on its tail. He saw debt and deflation as the big, bad actors. Now, their close relatives—too high debt and too low inflation—are still in play, at least for advanced economies.

Small businesses could be the lifeblood of Europe’s economy, but their size and high debt are two of the factors holding back the investment recovery in the euro area. The solution partly lies in policies to help firms grow and reduce debt.

Many low-income developing countries have joined the group of Eurobond issuers across the globe— in sub-Saharan Africa (for example, Senegal, Zambia, and Ghana), Asia (for example, Mongolia) and elsewhere, raising over US$21 billion cumulatively over the past decade. Tapping these markets provides a new source of funds, but also exposes borrowers to shifts in investor sentiment and rising global interest rates.

How quickly should the United States tighten monetary policy and exit from quantitative easing? Is the neutral real interest rate lower than before the crisis? Should we raise inflation targets? What can we learn from the unconventional policies that emerging markets adopted during the crisis? Are we entering an environment of global deflation? And if so, can the existing central bank toolkit stave off that threat?

Seven years after the crisis, the effects of unconventional monetary policies continue to be a matter of debate. There is little consensus not only about the effectiveness of these policies in promoting aggregate demand, but also about possible unintended side effects on financial stability.